Econometric Theory is a branch of economics that applies statistical methods to analyze economic data. It aims to quantify relationships between economic variables, allowing economists to test hypotheses and forecast future trends. By using models, researchers can better understand how factors like interest rates or consumer spending influence the economy. The theory combines elements from statistics, mathematics, and economic theory to create tools for empirical analysis. Econometricians often use techniques such as regression analysis to estimate the strength and nature of relationships, helping policymakers make informed decisions based on data-driven insights.